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April 22, 2015

A Modest Proposal (or Two)

Any observer of the interaction between the Federal Circuit and the Supreme Court over the past decade has recognized that the Court has become increasingly critical of the Federal Circuit's patent jurisprudence and of patents and patent law in general. This attitude approaches disdain in many instances, for example when Justice Kagan declares that the U.S. Patent and Trademark Office is "patent happy," or when Justice Alito says in a published opinion that "[t]he Federal Circuit's analysis fundamentally misunderstands what it means to infringe a method patent," or when the Chief Justice states in open court "Well, [appellate courts] don't have a choice, right? They can't say, I don't like the Supreme Court rule so I'm not going to apply it, other than the Federal Circuit"" (to chuckles all around). (This situation must be particularly galling to the Federal Circuit, tasked as it is with trying to apply the Court's "less than pellucid" patent law opinions.)

The consequence of this tussle between the courts is that 30 years of relative certainty has evaporated in seemingly an instant. An honest assessment of the current level of certainty in patent law is that there is much more uncertainty concerning eligibility and enforceability of issued patents; eligibility and patentability of pending applications; and the value of patents for licensing, which negatively impacts, inter alia, technology transfer from universities and other research institutions by suppressing the bargaining power of innovators when negotiating with corporations better positioned to bring useful products to market for the benefit of the populace. And thus the reason why the Founders gave Congress the power to grant patents ("to Promote . . . Progress of . . . the Useful Arts") is thwarted for apparently no good purpose.

One strand of the Court's thinking is clear: relying on legal academic theories having little empirical support (like the "Tragedy of the Anticommons"), the Court believes that patents are like the various items of furniture in "Goldilocks": you can have too much patenting or too little patenting, as stated in the two most recent decisions related to biotech and pharma patent law:

"As we have recognized before, patent protection strikes a delicate balance between creating 'incentives that lead to creation, invention, and discovery' and 'imped[ing] the flow of information that might permit, indeed spur, invention.'"

Justice Thomas, Myriad

"Patent protection is, after all, a two-edged sword. On the one hand, the promise of exclusive rights provides monetary incentives that lead to creation, invention, and discovery. On the other hand, that very exclusivity can impede the flow of information that might permit, indeed spur, invention . . ."

Justice Breyer, Mayo v. Prometheus

And, of course, the only people who know the correct balance are the members of the Court; this didn't work with regard to pornography and it certainly does not work for patent law precisely because it is certainty-destroying (besides being impractical). Indeed, it only makes sense if the Court purposefully wishes to return to the days when Justice Jackson could correctly state that "the only valid patent is one which this Court has not been able to get its hands on." Jungerson v. Ostby & Barton Co., 335 U.S. 560, 572 (1949) (Jackson, J., dissenting)

The Court's antipathy to patents, patent law and the Federal Circuit ultimately extends (intentionally or not) to how Congress has exercised the patent power. For example, the Court seems to think that "mere" discovery is not enough, despite the explicit recitation in the statute that "[w]hosoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101. And unlike earlier embodiments of the Court, there is little acknowledgement of or compliance with Congress's intent that "anything under the sun made by man" should be patent-eligible. This raises the question of why this is so; after all, the Court is perfectly aware of the limits of its Constitutional role, as set forth by the Chief Justice in his opinion affirming Congress's power to implement the various aspects of "Obamacare" (National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012)):

Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation's elected leaders. "Proper respect for a co-ordinate branch of the government" requires that we strike down an Act of Congress only if "the lack of constitutional authority to pass [the] act in question is clearly demonstrated." United States v. Harris . . . . Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation's elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.

Perhaps it is this simple: in rendering decisions on Obamacare, or the "milk" cases familiar to any first year law student studying the Commerce Clause, the Court is determining whether Congress's actions fall within the scope of an enumerated power. The right to grant patents, in contrast, is an enumerated power of Congress:

The Congress shall have the power to promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Rights to their respective writings and Discoveries. U.S. Const. art. I, sec. 8, cl. 8.

And maybe the Court feels it has a responsibility to scrutinize more carefully how Congress implements this power (including how the Patent Office exercises and the Federal Circuit interprets this power). The plenary effect of this review has led us to the present state of the law; again as stated by Justice Jackson:

Reversal by a higher court is not proof that justice is thereby better done. There is no doubt that if there were a super-Supreme Court, a substantial proportion of our reversals of state courts would also be reversed. We are not final because we are infallible, but we are infallible only because we are final. Brown v. Allen, 344 U.S. 443, 540 (1953) (concurring)

It is important to keep this finality in mind when thinking about how best to address the further reaches of the Court's recent patent jurisprudence, to try to reestablish some contact between the Constitution's mandate that the patent laws promote progress and the Court's assiduous efforts to the contrary.

Taking a page from Hippocrates, it is certainly the case that whatever is done must not make the situation worse. When thinking about actions that Congress could take, the wrong approach could lead precisely to this unwanted outcome, because nothing short of a Constitutional amendment could reverse a decision negating an Act of Congress that attempted to force the Court to overrule its recent precedent. And that, of course, will never happen.

History can in this instance be a guide, and one relevant historical fact is how P.J. Federico and Giles Rich wrote the portion of the 1952 Patent Act codified as Section 103, which introduced obviousness as a statutory requirement for patentability. The concept of obviousness (stated in other terms) had been introduced into U.S. patent law by the Court in Hotchkiss v. Greenwood (1850), where the Court said:

Unless more ingenuity and skill in applying the old method . . . were required in the application of it to [the new product of the method] than were possessed by an ordinary mechanic acquainted with the business, there was an absence of that degree of skill and ingenuity which constitute essential elements of every invention. In other words, the improvement is the work of the skillful mechanic, not that of the inventor.

This language is frighteningly reminiscent of language in the Court's recent Mayo and Myriad decisions, insofar as it renders patentability categorical: if the basis for obtaining a patent is on the existence vel non of an inventor, this is not so far from the current Court's categorical decisions about the existence of an invention.

Messrs. Rich and Federico avoided this outcome by directing the Court's attention to the underlying basis for their unease about "inventions" that were the product of efforts by a mere mechanic, by drafting a requirement that the claims not be obvious (a determination based on the content of the prior art, albeit still not providing the clearest basis for making a decision on patentability). That Section 103's drafters were successful can be ascertained from the Court's first post-1952 decision on this new part of the statute:

In [Section] 103 of the 1952 Patent Act Congress added the statutory nonobvious subject matter requirement, originally expounded in Hotchkiss, which merely codified judicial precedents requiring a comparison of the subject matter sought to be patented and the prior art, tying patentable inventions to advances in the art. Although 103 places emphasis upon inquiries into obviousness, rather than into "invention," the general level of innovation necessary to sustain patentability remains unchanged under the 1952 Act.

Graham v. John Deere, 383 U.S. 1 (1966). With these precedents in mind there may be a way to find a middle course that can accommodate the Court's needs to cabin the patent right and innovators' needs for certainty in patent law. The first area is in "natural products" patenting, where the Court (for the first time) extended a preclusion against patenting for compounds that were "merely" isolated. Although the Court ostensibly rendered an extremely limited decision ("We merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material") that hasn't been how it has been interpreted. The Court's language "suggests" (or "mandates") interpretations putting the patent-eligibility of previously patent-eligible subject matter ("merely" isolated antibiotics, antibodies, vitamins, etc.) at risk. This can be better appreciated by the effect of the PTO's decision on the patent-eligibility of 1355 (small molecule) drugs approved by the FDA between 1981-2010, wherein about 75% of antibacterial drugs and almost 80% of small molecule anticancer drugs were natural products or derivatives of natural products and would have been unpatentable under the Office's first guidance implementing the Court's decisions. This cannot be what the Court intended, and it is up to the patent community to help remedy what the Court has recently wrought.

One way to do so would be to include a new section 35 U.S.C. § 100(j):

The term "composition of matter" as used herein encompasses a chemical or other product found or derived from nature provided that the composition has been changed from its natural state in its structure, function, purity, or use.

This language might be sufficient to mollify the Court's concerns about patenting natural products, because it parallels the Court's own language in Chakrabarty, wherein the standard for patent-eligibility was that the invention is "a product of human ingenuity 'having a distinctive name, character [and] use,'" Hartranft v. Wiegmann, 121 U.S. 609 (1887). This is provided, of course, that this Court is as willing as the Court in 1966 to accept that Congress had within its enumerated power the right to make this determination.

The other item of the Court's jurisprudence that has "disturbed the settled expectations" of the patent community is the Mayo v. Prometheus decision. Containing an explanation of its reasoning less straightforward than the Court's decision in Myriad, the Court conflated Sections 101, 102 and 103 of the Patent Act in reaching its decision and seemingly reintroduced the inchoate concept of "inventiveness" into patent law. More problematically, the Court's analysis seemed to contravene the holding in Diamond v. Diehr (1981) that claims must be considered "as a whole." And failing to hold true to the Diehr standard has permitted district courts, and even the Federal Circuit to declare claims invalid under Section 101 based on a determination that a claim consists of a "natural law, physical phenomenon or abstract idea" plus nothing "more" than what are "routine, conventional and well-understood" applications of the natural laws or uses of the natural products. See, e.g., PerkinElmer, Inc. v. Intema Ltd.; Ariosa v. Sequenom; Genetic Technologies Ltd. v. Labcorp; and Univ Utah Res. Found. v. Ambry Genetics (Myriad III).

This situation leads to the second proposal, for a new section 35 U.S.C. § 282(d):

When assessing a defense to infringement that a patent claim does not satisfy the requirements of §§ 101, 102 or 103 of this chapter, the invention must be considered "as a whole" and not by its individual limitations. The conventionality of individual limitations shall not be the basis for a determination that a claim is invalid under said §§ 101, 102 or 103.

Additional sections of the statute, or rules promulgated by the Office, may be needed to ensure the same standard is applied during patent prosecution. But, like the proposal for Section 101, this change in the law finds support, at least, under Diehr and thus may pass muster at the Court should they be challenged.

If the past decade has shown the patent community nothing else, it is that innovation cannot be held hostage to political or doctrinaire whims of any branch of government. The idea in 1982 that U.S. patent law needed consistency was a good one; it failed only because it did not recognize that the biggest source of inconsistency would be the Supreme Court. It is a lesson that needs to be well learned, accommodated and its outcome overcome if the U.S. is to retain its lead in global innovation and the economic benefits arising from this innovation.

Note: This post was adapted from a panel discussion at the Spring 2015 BIO IPCC meeting held on April 15-17 in St. Louis, MO.

That is exemplified in the recent toxic opinion in University of Utah (Myriad III):

"The primers before us are not distinguishable from the isolated DNA found patent-ineligible in Myriad and are not similar to the cDNA found to be patent-eligible. Primers necessarily contain the identical sequence of the BRCA sequence directly opposite to the strand to which they are designed to bind. They are structurally identical to the ends of DNA strands found in nature.

Contrary to Myriad’s argument, it makes no difference that the identified gene sequences are synthetically replicated. As the Supreme Court made clear, neither naturally occurring compositions of matter, nor synthetically created compositions that are structurally identical to the naturally occurring compositions, are patent eligible."

It is strongly arguable that this chain of reasoning, if offered by a law student in answer to a problem in legal analysis, would gain no more than a failing grade. It confuses symptomatic generalisation of the outcome in Myriad with analysis for and identification of the underlying rule of law which is what is binding in later cases.

In particular, the reason why genomic BRCA1 was held ineligible in Myriad was that the only reason supporting eligibility was isolation, and there was no second supporting reason e.g. new utility. The rule of law that lead to that outcome was that stated in Hartranft, which has been applied in a number of Supreme Court opinions.

The patentability of cDNA as a composition of matter arose because it is a synthetic molecule, as explained by Justice Thomas. It is therefore NOT a natural product. The rules which differentiate synthetic and natural products are NOT the same as the rules by which the patent-eligibility of a natural product e.g. adrenalin are decided. On that basis, structural differences linked to cDNA an artificial molecule have no more relevance to the rules governing natural product eligibility than the actions of a footballer on the playing field have to the rules of golf.

There is a reference to short sequences under this heading in Myriad. Justice Thomas said:

"cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived. As a result, cDNA is not a “product of nature” and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA."

When viewed in context all that Justice Thomas is saying is that a short segment not involving an intervening intron might not qualify as a composition of matter. In that case it falls to consider whether the short segment demonstrates new utility and qualifies under Hartranft.

The rejection of new function and utility in Myriad III is extraordinarily harsh and questionable. Primers bind to a nucleotide chain in conventional manner, but they also serve as sites for initiation of PCR, which is not a function carried out by any naturally occurring sequence.

Decisions of this kind are, in my submission, subject to an inadequate level of legal analysis and scrutiny. In their more extreme forms, they are subject to inadequate protest from industry and the profession because they are simply WRONG.

"If the past decade has shown the patent community nothing else, it is that innovation cannot be held hostage to political or doctrinaire whims of any branch of government."

Kevin,

How very true. When it comes to patent law jurisprudence and heeding the express provisions of the patent statutes as enacted by Congress, Our Judicial Mount Olympus has acted as "rogue branch" of that "government."

It seems like what happens is that there are all these actors out there like the justices that will grab power whenever offered the chance. The justices are happy to write patent law when there appears to be support to the proposition that the system is not working.

To my mind, Alice is contrary to the 1952 Patent Act and the SCOTUS says that the 1952 Patent Act "merely" codified their case law, but that isn't what Rich said and clearly there was more to the 1952 Patent Act (e.g., in the manner invented.)

I think that Paul Cole is (as usual) exactly right about the "judicial cringe" at the CAFC. They have been smacked down so many times now that they are just preemptively giving in to the stupidest aspects of supreme court patent jurisprudence so that they can be spared the humiliation of having those inanities imposed upon them in certiorari and reversal.

This is why I was a bit surprised to see Dr. Noonan's post develop as it did. Based on his opening paragraphs, I thought that he was going to proposed something really bold. Instead, his suggestions strike me as very modest proposals indeed. I agree with all of the proposed statutory amendments, but it seems to me that what we really need (based on the long historical trend of Congress fixing the supreme court's mistakes and the SCotUS simply reimposing these same mistakes in new guises) is to take jurisdiction over Title 35 away from the SCotUS entirely.

Back when the CCPA was first created, there was no right of certiorari from the CCPA, and therefore the CCPA's decisions were unreviewable. I think that Congress would do well to amend Title 35 to remove patent decisions from the scope of appellate review by the SCotUS (except, perhaps, for matters that do not relate to patent law, such as FRCP or FRE matters).

"Back when the CCPA was first created, there was no right of certiorari from the CCPA, and therefore the CCPA's decisions were unreviewable."

From Wikipedia:

The CCPA began as the United States Court of Customs Appeals, created by the Payne-Aldrich Tariff Act of August 5, 1909, and it started its work the following year, on April 22, 1910. Five judges for the new court were appointed by President Taft: Robert Morris Montgomery, William H. Hunt, James Francis Smith, Orion M. Barber and Marion De Vries. The jurisdiction was originally appeals from decisions of the Board of General Appraisers, and no further appellate review was permitted. This changed in 1914, when writ of certiorari by the United States Supreme Court was allowed.

I agree that what was true of appellate review of CCPA decisions originally should be instituted now with respect to the Federal Circuit: no review allowed by Our Judicial Mount Olympus.

Elephant, meet room. All the dancing really swings around software patents that are a) functional at the point of novelty b) assembled, rather than "discovered" or "invented" c) written expressions of instructions, which mean a kind of literature, which can never be fairly or consistently judged on a structural basis of novelty/obviousness. Patents were meant for things; not for ideas. Much of the mischief hence is to try and accommodate a perversion.

While respecting Dr. Noonan's desire to not let the comment section here turn into snipe-fest like certain other blogs, your comment at 01:45 has every appearance of being not only NOT informed, but severely MIS-informed.

Each of the "points" that you wish to make has been rebuked soundly in law, fact, and policy many times over on several different forums.

Your unwillingness to listen and learn and desire only to post again the philosophical position of that which you want to believe in makes me think that any attempt to converse with you and point out your errors here is a lost cause.

So with this in mind, I will "borrow" a response from another blog when a poster insists on "having an opinion" while also insisting on not being informed:

As to having opinions – I am also most definitely not saying that you cannot have them But if you want to have an informed opinion, then yes, something more is required. If you are unwilling to change your opinion after being informed, then your opinion is more clutter and unhelpful than it is helpful. You always have the choice of being helpful or unhelpful – you do not have the choice of ignoring being informed and then merely claiming that your opinion is helpful when it is not.

As to making sense to you, well, that takes a certain willingness on your part to realize that in fact, naked opinions that remain steadfast based on pure belief systems and that are not willing to advance when being informed – that is, willing to recognize what “making sense” means and entails – are opinions that while perfectly able to “be had” are not the types of opinions that are worthwhile to “be had.”

Excellent analysis, and very thought-proving. I hope this and other discussions prompted by the somewhat acrimonious relationship developing between the two main "Patent Courts" of our country spurs a broad-based dialog about what is going on in our troubled "patent waters."

My hope is this ends up shining an almost blinding light on what I believe to be the real culprit behind this ever-increasing mess that is our Patent Law—Congress! Our federal Congress has become almost ineffective, especially in the realm of patents. I believe this is due to the almost overwheling economic influence that is brought to bear on its members by a few extremely well-funded "special interest" groups, especially the "Big Pharma" lobby, which I submit directly or indirectly controls almost everything Congress does in the patent arena.

Think about it. Every patent law initiative of significance that comes before Congress is presented as a pre-staged, planned out campaign of glitzy PR mumbo-jumbo, where everything is planned ahead of time to dazzle Congress and the media as to how this "patent reform" legislation is going to make everything better for everybody. It is interesting how the planning identifies all potential "downsides," which are carefully, subtly and effectively "demonized," "minimalized," and/or "marginalized" by advance publicity put out by the pushers and their willing accomplices in the media.

Who has the money and the "connections" to do this?

We saw this in the recent, cleverly labeled "America Invents Act," all packaged up with a big yellow bow and brought before Congress under the phony guise of urgently-needed "patent reform." I mean, who can be against "reform"? The Senate vote was something like 98-0, and I understand a post-legislative review revealed that only a couple of members even professed to have read the legislation, and that none could now "correctly" recall even one of the main elements of the legislation.

How in the world is it better for the "grass roots" meaningful technology generators in our country to have the right to a technological patent determined by a "race to the USPTO," as opposed to a "race to the Laboratory"? What ridiculous nonsense! All things considered, the "race to the laboratory" method has worked exceedingly well over the last 200+ years, and has been a huge factor in America's unparalleled dominance in cranking out "world-changing" technologies that were developed to a significant degree of confident operability before the first patent application was filed in the USPTO!

Why change it? Since when did America change to be like everyone else in the world? I always thought it worked the other way around!

This whole thing about how Congress goes about its "tweaking" of the Patent Act is a farce! If anything needs "reform," it is how our Congress works (or, rather, doesn't work)! When are we going to wake up?

As to the Supreme Court-Federal Circuit thing, most in the Patent Bar figured out early on that the Federal Circuit was being used by members of Congress as a place to "place" secon-tier, judicial "misfits" in order to repay some sort of political favors. The Supreme Court is probably now just waking up to this, as it begins to see the troubling fractionation of our Patent Law by the issuance of far too many wildly inconsistent "panel" decisions from the CAFC, many produced by well-meaning, second-tier judges with little or no background of the vast and hyper-specialized jurisprudence of Patent Law, and who have no business trying to decide such questions.

No doubt the "Supremes" feel compelled to verbalize their broader and deeper awareness of the fact that the Federal Circuit, as currently constituted by our ineffectual Congress, just isn't working.